Investor's Corner
Tesla posts another profitable quarter in Q4, Model 3 in focus for global rollout
Tesla’s (NASDAQ:TSLA) fourth-quarter and full year 2018 earnings saw the Silicon Valley-based electric car maker beat Wall Street revenue estimates after posting $7.2 billion in revenue but fall below earnings estimates with a GAAP profit of $139 million due to a $54 million charge attributable to non-controlling interests.
Profitability
Tesla posted a smaller profit this quarter, as lower-priced variants of Model 3 hit the market, yet the company managed to meet the bold and ambitious target set by Elon Musk after Q3 2018’s surprise profit. It should be noted that Tesla’s second consecutive profitable quarter did not come easy for the carmaker, with the company having to trim its workforce by 7% amidst its continued efforts to bring the $35,000 base Model 3 to market. That said, the company’s fourth-quarter results did echo Musk’s estimates posted in an email to Tesla employees earlier this month, when he noted that Q4 would likely see a profit, though not as notable as the third quarter.
“As we improve the production rate of Model 3, the cost per vehicle continues to decline. It is critical that we continue this trend so that we can keep increasing the affordability of Model 3 while retaining a sustainable level of profitability.” Tesla wrote in its update letter.
Tesla also notes that the recent restructuring actions will reduce the company’s costs by about $400 million annually.
In the fourth quarter, the company saw its free cash flow rise to $910 million, from the $739 million last quarter.
Revenue
The company’s revenue for the fourth quarter consisted of $6.3B in automotive revenue and $371M from its energy and battery storage business. Automotive revenue saw a slight increase of 3% compared to the previous quarter. The energy and battery storage division, on the other hand, declined by 7% compared with last quarter.
Model 3
Elon Musk was not joking when he described the Model 3 as a “bet-the-company” vehicle. Just like in the third quarter, it was the Model 3’s sales that ultimately allowed Tesla to record its second consecutive profitable quarter in Q4 — a feat deemed impossible by the company’s critics. Continuing from the momentum it gained in the third quarter, Tesla’s Model 3 broke new records in the fourth quarter, delivering 63,359 units of the electric sedan to customers. Throughout 2018, Tesla delivered a total of 145,846 Model 3, making the vehicle the best-selling luxury car in the United States for the year.
“In Q4, we delivered 63,359 Model 3 vehicles to customers in North America. In January 2019, we started to produce Model 3 vehicles for Europe and China, and the car is now fully certified for sale in these markets. The market opportunity for Model 3 in Europe and China exceeds North America based on the most recent sales of mid-sized premium sedans. Model 3 was designed from the outset for a global market, and shares more than 98% of its parts in common across its regional variants. ”
In the fourth quarter, Model 3 maintained a stable gross margin at over 20%.
Tesla expects to increase Model 3 production volumes at its Fremont factory throughout 2019 until reaching a sustained rate of 7,000 units per week by the end of the year.
“We are planning to continue to produce Model 3 vehicles at maximum production rates throughout 2019. Inclusive of Gigafactory Shanghai, where we are initially aiming for 3,000 Model 3 vehicles per week, our goal is to be able to produce 10,000 vehicles per week on a sustained basis.”
Tesla’s Q4 and Full Year 2018 Update Letter can be accessed here.
More from Elon Musk in the Q&A call
- Tesla to begin Model Y tooling this year
- Tesla veteran CFO Deepak Ahuja is leaving
- More on Tesla’s upcoming pickup truck
There are a lot of Tesla bulls out there who have astronomical expectations for the company, especially as its arm of reach has gone well past automotive and energy and entered artificial intelligence and robotics.
However, some of the most bullish Tesla investors believe the company could become worth $100 trillion, and CEO Elon Musk does not believe that number is completely out of the question, even if it sounds almost ridiculous.
To put that number into perspective, the top ten most valuable companies in the world — NVIDIA, Apple, Alphabet, Microsoft, Amazon, TSMC, Meta, Saudi Aramco, Broadcom, and Tesla — are worth roughly $26 trillion.
Will Tesla join the fold? Predicting a triple merger with SpaceX and xAI
Cathie Wood of ARK Invest believes the number is reasonable considering Tesla’s long-reaching industry ambitions:
“…in the world of AI, what do you have to have to win? You have to have proprietary data, and think about all the proprietary data he has, different kinds of proprietary data. Tesla, the language of the road; Neuralink, multiomics data; nobody else has that data. X, nobody else has that data either. I could see $100 trillion. I think it’s going to happen because of convergence. I think Tesla is the leading candidate [for $100 trillion] for the reason I just said.”
Musk said late last year that all of his companies seem to be “heading toward convergence,” and it’s started to come to fruition. Tesla invested in xAI, as revealed in its Q4 Earnings Shareholder Deck, and SpaceX recently acquired xAI, marking the first step in the potential for a massive umbrella of companies under Musk’s watch.
SpaceX officially acquires xAI, merging rockets with AI expertise
Now that it is happening, it seems Musk is even more enthusiastic about a massive valuation that would swell to nearly four-times the value of the top ten most valuable companies in the world currently, as he said on X, the idea of a $100 trillion valuation is “not impossible.”
It’s not impossible
— Elon Musk (@elonmusk) February 6, 2026
Tesla is not just a car company. With its many projects, including the launch of Robotaxi, the progress of the Optimus robot, and its AI ambitions, it has the potential to continue gaining value at an accelerating rate.
Musk’s comments show his confidence in Tesla’s numerous projects, especially as some begin to mature and some head toward their initial stages.
Elon Musk
Tesla director pay lawsuit sees lawyer fees slashed by $100 million
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
The Delaware Supreme Court has cut more than $100 million from a legal fee award tied to a shareholder lawsuit challenging compensation paid to Tesla directors between 2017 and 2020.
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
Delaware Supreme Court trims legal fees
As noted in a Bloomberg Law report, the case targeted pay granted to Tesla directors, including CEO Elon Musk, Oracle founder Larry Ellison, Kimbal Musk, and Rupert Murdoch. The Delaware Chancery Court had awarded $176 million to the plaintiffs. Tesla’s board must also return stock options and forego years worth of pay.
As per Chief Justice Collins J. Seitz Jr. in an opinion for the Delaware Supreme Court’s full five-member panel, however, the decision of the Delaware Chancery Court to award $176 million to a pension fund’s law firm “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board.
The justices then reduced the fee award from $176 million to $70.9 million. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Chief Justice Seitz wrote.
Other settlement terms still intact
The Supreme Court upheld the settlement itself, which requires Tesla’s board to return stock and options valued at up to $735 million and to forgo three years of additional compensation worth about $184 million.
Tesla argued during oral arguments that a fee award closer to $70 million would be appropriate. Interestingly enough, back in October, Justice Karen L. Valihura noted that the $176 award was $60 million more than the Delaware judiciary’s budget from the previous year. This was quite interesting as the case was “settled midstream.”
The lawsuit was brought by a pension fund on behalf of Tesla shareholders and focused exclusively on director pay during the 2017–2020 period. The case is separate from other high-profile compensation disputes involving Elon Musk.
Investor's Corner
Tesla (TSLA) Q4 and FY 2025 earnings call: The most important points
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Tesla’s (NASDAQ:TSLA) Q4 and FY 2025 earnings call highlighted improving margins, record energy performance, expanding autonomy efforts, and a sharp acceleration in AI and robotics investments.
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Key takeaways
Tesla reported sequential improvement in automotive gross margins excluding regulatory credits, rising from 15.4% to 17.9%, supported by favorable regional mix effects despite a 16% decline in deliveries. Total gross margin exceeded 20.1%, the highest level in more than two years, even with lower fixed-cost absorption and tariff impacts.
The energy business delivered standout results, with revenue reaching nearly $12.8 billion, up 26.6% year over year. Energy gross profit hit a new quarterly record, driven by strong global demand and high deployments of MegaPack and Powerwall across all regions, as noted in a report from The Motley Fool.
Tesla also stated that paid Full Self-Driving customers have climbed to nearly 1.1 million worldwide, with about 70% having purchased FSD outright. The company has now fully transitioned FSD to a subscription-based sales model, which should create a short-term margin headwind for automotive results.
Free cash flow totaled $1.4 billion for the quarter. Operating expenses rose by $500 million sequentially as well.
Production shifts, robotics, and AI investment
Musk further confirmed that Model S and Model X production is expected to wind down next quarter, and plans are underway to convert Fremont’s S/X line into an Optimus robot factory with a capacity of one million units.
Tesla’s Robotaxi fleet has surpassed 500 vehicles, operating across the Bay Area and Austin, with Musk noting a rapid monthly expansion pace. He also reiterated that CyberCab production is expected to begin in April, following a slow initial S-curve ramp before scaling beyond other vehicle programs.
Looking ahead, Tesla expects its capital expenditures to exceed $20 billion next year, thanks to the company’s operations across its six factories, the expansion of its fleet expansion, and the ramp of its AI compute. Additional investments in AI chips, compute infrastructure, and future in-house semiconductor manufacturing were discussed but are not included in the company’s current CapEx guidance.
More importantly, Tesla ended the year with a larger backlog than in recent years. This is supported by record deliveries in smaller international markets and stronger demand across APAC and EMEA. Energy backlog remains strong globally as well, though Tesla cautioned that margin pressure could emerge from competition, policy uncertainty, and tariffs.
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